Last week was all about the interest rates decision by the Fed and the labor market report. This week should all about interest rates in the Euro zone and the United Kingdom. Both decisions are expected on Thursday. The European Central Bank is likely to keep interest rates unchanged in the Euro zone at 4.00%. A different situation is in the UK where the Bank of England probably will cut interest rates by 25 bp. to 5.25%. That would make a second consecutive cut by the BoE but I really doubt if it is really needed.

The rest of the week should be calmer. Starting on Monday, the Royal Bank of Australia is expected to hike interest rates to 7.00% from the current 6.75%. Inflation has been slowly raising recently and such move is widely expected by the market. On Tuesday, investors will need to focus on the ISM Non-manufacturing report. The reading is forecasted to be lower than the previous one but still above 50 points. Readings lower than 50 show that the economy is moving into recession. On Wednesday, only the American nonfarm productivity report is worth attention. Thursday, besides the interest rate statements by the ECB and the BoE, will bring the U.S unemployment claims and pending home sales reports.

Markets are struggling recently. Good news are mixed with bad ones. Will the interest rate cuts in the U.S help the markets? The answer to that question we will learn in a couple of months.  

Adam Narczewski